From the following particulars, calculate value of goodwill of a partnership firm by applying capitalisation of average profit method: Total profits from the last 5 years are ₹261000 Capitalisation rate is 20% and the firm has net assets of ₹200000
Options:
₹55000
₹61000
₹71000
₹74000
Correct Answer:
₹61000
Explanation:
Average profit = 261000/5 =₹52200 Capitalised value of firm = 52200*100/20 = ₹261000 GOODWILL= Capitalised value of firm- net assets = 261000-200000= ₹61000